TAXATION (MARKS 100)
Module C (3 hours)
Q.1 Mr. Manto worked as an employee in Berlin Hotel, Germany for a period of five years.
During the said period he did not visit Pakistan for a single day. He returned to Pakistan on
July 1, 2008 and immediately joined as a General Manager in a well-reputed hotel, based in
Karachi.
Assume that the details of his income for the tax year 2009 are as follows:
(i) Basic salary (per month) Rs. 100,000
House rent allowance (per month) Rs. 30,000
Medical allowance (per month) Rs. 10,000
(ii) Besides medical allowance, he is also entitled to free medical treatment at approved
hospitals.
(iii) He has been provided a company maintained 1600cc car which was used partly for
official and partly for personal purposes. The hotel has leased the car from a bank. The
gross lease rentals payable over the period of lease amount to Rs. 2,700,000. The fair
market value of the car at the time of lease was Rs. 1,600,000. The total lease rentals
paid by the hotel during the year amounted to Rs. 800,000.
(iv) He is entitled to lunch at the hotel’s restaurants where the usual charges are Rs. 400 per
person. He is entitled to concessional rate of Rs. 40 per day which is deducted from his
salary. Assume that there are 300 working days in the year.
(v) He went for a training course to Islamabad where boarding and lodging cost amounting
to Rs. 150,000 was borne by the hotel. He incurred a further expense of Rs. 125,000
which was reimbursed by the hotel.
(vi) Provident fund was deducted @10% of his basic salary. An equal amount was
contributed by the hotel. Interest credited to his provident fund account amounted to
Rs. 48,000.
(vii) As per terms of employment agreed with Mr. Manto, tax payable on salary will be
borne by the hotel.
(viii) During the year, he also received an amount of Rs. 94,000 (net of withholding tax) from
a local university where he gave lectures on hotel management.
(ix) On July 15, 2008, he received a lump sum amount of Rs. 4,000,000 through a normal
banking channel as final settlement from Berlin Hotel.
(x) On August 1, 2008, he inherited 25,000 shares of a private limited company. The
estimated fair market value of the shares, on the date of inheritance, was Rs. 42 per
share. He sold all the shares on February 28, 2009 at Rs. 62 per share.
(xi) He paid zakat amounting to Rs. 200,000 to an approved organization, through cross
cheque.
Required:
(a) Compute Mr. Manto’s taxable income and tax payable for the tax year 2009.
(b) Briefly explain the treatment of items which are not considered in the above
computation.
(18)
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